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The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Aug-19

Analyst
Shahzaib Khalid
shahzaib.khalid@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains the Broker Management Rating of Ismail Iqbal Securities (Pvt.) Limited

Rating Type Broker Management
Current
(28-Aug-19 )
Previous
(20-May-19 )
Action Maintain Maintain
Long Term BMR3 BMR3
Short Term - -
Outlook Stable Stable
Rating Watch - -

The ratings reflect the company's subdued performance due to operating losses on the back of low volumes and depressed return of the equity market. The company has a modest market share in the brokerage industry. The company’s services mainly comprise equity brokerage. The ratings incorporate the company's diversified revenue streams followed by investment advisory assignments such as private placements, underwriting, mergers and acquisitions and privatization. The assigned rating takes into account the company's high exposure to market risk due to its proprietary book, which may indicate conflict of interest but the management has implemented adequate measures to cope with this risk. The company has lean organizational structure where all department heads are directly reportable to the CEO. The company’s board is complying with the requirements of companies Act 2019 but can be strengthened by indulging an independent director. Furthermore, the company has adequate capitalization levels with the net capital balance of ~PKR 195mln at end Jun-19. The company has a moderate leveraged structure. The debt is well covered by liquid assets. However, the equity of the company eroded due to recent losses.
The ratings are dependent upon the management's efforts to improve market share in volume and value. Meanwhile, strong BoD framework, insightful monitoring of market risk and liquidity management remains imperative. Retention of key personnel and continuous improvement in customer servicing tools will bode well for the company. Recovering the company's equity base to agreed parameters will have a positive impact on ratings.

About the Entity
Ismail Iqbal Securities (Pvt) Limited, a venture of Ismail Group, was established in August 06, 2004. The company operates through two branches, both in Karachi. Its main activities include brokerage, investment advisory services, and securities research and underwriting. The company is owned by three individuals, wherein the majority shareholding (65%) lies with the CEO - Mr. Ahfaz Mustafa. The remaining stake is equally held by his siblings. The company's auditors are Baker Tilly Mehmood Idress Qamar.

The company’s board comprises two experienced individuals including the CEO and his elder brother Mr. Azhar Iqbal (non-executive director). Executive decision making rests with CEO while Mr. Azhar Iqbal provides governance oversight.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.